Kiwifruit exporters' dollar battle

Kiwifruit exports are worth more than $1 billion a year. Photo / Alan Gibson

Zespri says the year is shaping up to be strong but key markets could be affected by a high kiwi dollar.

Kiwifruit marketer Zespri faces a positive outlook this year but there are headwinds - the New Zealand dollar's strength against the currencies of its two biggest export destinations, Japan and Europe.

Kiwifruit exports are worth more than $1 billion a year and while the kiwi's fall against the US dollar has been good for growers in general, the same can not be said for those with exposure to the euro and the yen.

Last week, economic data showing the eurozone had slipped into deflation put more downward pressure on the euro and drove the New Zealand dollar to a 2 year high of just over 66 euro cents. The kiwi has also performed strongly against the yen, nearing 94 yen after rallying by 10 since last October.

"We've got hedging in place for the yen for the next year or two, but obviously the worsening position of the yen to the New Zealand dollar is not helping, so that is of concern to us," said Zespri's chief operating officer, Simon Limmer.

"Similarly we have not seen a lot of upside in the euro and still take a relatively conservative view as to where that might lead.

"However, there is some benefit in the US dollar over the last couple of months, which has started to flow through into our thinking over the next few years," he said.

The Kiwi/US dollar rate has come back sharply since hitting US88c early last year. It traded at US78c late last week and is predicted to head lower as the greenback continues to recover from the global financial crisis.

Zespri's biggest market by volume is Europe but Japan is hugely important. "Japan has been our cornerstone market for decades, representing about 15 to 20 per cent of sales by volume, but about double that in terms of value," Limmer said.

Limmer said China was proving to be a good market for growth in terms of both volume and value. The importance of China as a market will see Zespri adopt a better balanced portfolio across the markets with less reliance on Europe and Japan, he said. Zespri has invested heavily in its brand in the People's Republic.

"We had 50 per cent per annum growth by volume over the last couple of years and that's likely to continue."

Within five years, China is likely to be Zespri's number one market by volume - representing 20 to 25 per cent of New Zealand's kiwifruit exports.

"But more importantly, it is becoming a more value-oriented market for us as well, so we are starting to extract better per tray returns than we were able to extract from other markets."

Overall, the sector continues to recover from the body blow inflicted by the PSA virus in 2011. PSA savaged the gold variety Hort16A, meaning that green varieties "carried the flag" for Zespri in export markets. Exports are currently two-thirds green and one-third gold, but Zespri expects the ratio to be 50/50 in one or two years.

"We know that the new gold variety (Gold3 or Sungold) has huge potential, particularly in the Asian markets, which seem to prefer a slightly sweeter product, and the gold product has to date been the most successful in those markets."

Sungold was finding favour in Europe as well, Limmer said.